Nevada latest state to scrap its Obamacare exchange

Nevada has become the latest state to scrap its crippled Obamacare exchange and join the federal HealthCare.gov for at least a year.

The Silver State, which had seemed to start strong last October before smashing into a wall of technical problems, is the only state with a Republican governor that ran its own health insurance exchange in 2014. Gov. Brian Sandoval had argued that it was important for his state to steer its own exchange, even though he opposed Obamacare.

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But the Nevada exchange board decided Tuesday that its effort couldn’t be salvaged in time for the 2015 enrollment season that starts in November. Nevada becomes the fourth state to admit its enrollment system, which cost tens of millions of dollars, is beyond repair and move to replace it with a substantially new one.

The board of the exchange, known as Nevada Health Link, voted unanimously to end its relationship with Xerox, the vendor that had received a $75 million contract to build the online enrollment portal. Instead, it will fold into HealthCare.gov.

“We’ve seen so many broken promises from Xerox on how they’re going to fix it that at some point it just becomes not credible,” said Marie Martin Kerr, a member of the board appointed by Sandoval.

Board members left the door open to retaking control of Nevada’s exchange after 2015 but emphasized that they can lean on HealthCare.gov as long as they choose.

Under Sandoval, a popular GOP governor seen as having possible national aspirations, Nevada opted for both the state exchange and expanded Medicaid under the Affordable Care Act.

Both were political risks because Obamacare is so toxic for Republicans. Nevada political analyst Jon Ralston said the exchange’s implosion could haunt Sandoval.

“To the extent that he’s the guy who decided to erect the exchange and it’s an unmitigated, expensive disaster, it’s an issue he will have to deal with in any future run,” Ralston said. “Could it hurt him being considered for veep, if that ever were to seriously happen? Perhaps. He’s just lucky the Democrats didn’t have a real candidate against him this year.”

Sandoval blames the contractor.

“Unfortunately, the board was placed in this position because Xerox has failed to perform its contractual duties. The Silver State Health Insurance Exchange Board is statutorily charged with deciding the future of Nevada Health Link. The board made the best decision it could under these difficult circumstances,” Sandoval’s press secretary, Tyler Klimas, said in an email.

Two other GOP governors — New Mexico’s Susana Martinez and Idaho’s Butch Otter — tried to get state exchanges up in 2014 but the exchanges weren’t ready in time and deferred to HealthCare.gov. They’re now working to get exchanges running in 2015. Michigan’s Rick Snyder also backed the state exchange but his GOP-majority Legislature rebuffed him.

Thirty-six states, mostly led by Republicans, relied on the federal exchange for enrollment, and that number appears likely to rise in 2015. Massachusetts and Oregon, both Democratic states that enthusiastically embraced the health law, have taken steps toward joining HealthCare.gov. Maryland has scrapped its system but is trying to adapt a version of Connecticut’s successful exchange.

Senate Majority Leader Harry Reid of Nevada said that he supports any solution that would repair his state’s crippled insurance exchange.

“Whatever the governor and the Legislature wants, I support,” he told POLITICO.

Nevada initially set out to enroll 118,000 people by March 31, but severe tech problems forced state officials in January to slash the projection to 50,000. The exchange spewed out inaccurate information to people signing up, including incorrect subsidy amounts for low-income people. As of May 10, just 35,000 had officially enrolled.

Xerox pleaded with the exchange board Tuesday to give it another chance, promising to fix the system quickly. Sandoval had said earlier this year that he had gotten a personal assurance from the company’s CEO that it would get done.

“We’re being very aggressive with Xerox to ensure it is doing what it has to do,” he said. “I’m going to hold Xerox’s feet to the fire.”

But the Nevada exchange board lost patience with the company and decided to move on.

“I have no appetite for that at all,” said Lynn Etkins, vice chairwoman of the board, when discussing the prospect of keeping Xerox. “I don’t think that’s a smart move for the board. I don’t think that’s a smart move for Nevada.”

“We believe it is time to make a change,” the Nevada Association of Health Plans wrote in a letter to the board.

Board members were primarily concerned that moving to the federal exchange would scramble the state’s Medicaid program, which has been relying on the state-run system to steer people to the proper programs. That one-stop option is not available on the federal system.

Nevada officials met with senior Obama administration health officials in Washington last week and were encouraged to consider transferring control to the feds. Those who attended the meeting said CMS Administrator Marilyn Tavenner stressed that Nevada had little time to make a decision and said June 30 would be the firm deadline to decide whether to join HealthCare.gov.

Joining HealthCare.gov was among a range of options considered by the board, including continuing with Xerox, hiring a new contractor or borrowing another state’s technology to try to rebuild the system.

Like Nevada, Oregon and Massachusetts took steps to join the federal exchange in recent weeks. Maryland, too, scrapped its system but opted to borrow Connecticut’s technology to salvage a state-run system. It’s unclear if the Obama administration will approve that decision.

Nevada officials also considered adopting another state’s system, but some board members raised concerns about its cost.